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Finance Ministry may seek higher dividend from PSUs to contain deficit
October, 17th 2013

The Finance Ministry may seek higher dividend payments from state-owned companies to contain the fiscal deficit at 4.8 per cent of GDP in the current financial year.

The issue of dividend payment is likely to come up for discussion at a meeting of heads of major public sector units (PSUs) in sectors such as steel, coal, mines and power called by Finance Minister P Chidambaram tomorrow.

"The Finance Minister will meet the chiefs of PSUs tomorrow and will be discussing various issues, including dividend payment and investment of surplus funds," a senior finance ministry official said.

Last week, Chidambaram said at an IMF Committee meeting in Washington that the government is committed to the path of fiscal consolidation and has drawn red lines for the fiscal and current account deficits.

"We shall not allow the red lines to be breached under any circumstances and we shall remain within the red lines. We are prepared to take difficult decisions in this regard, should the need arise," the minister had said.

The government has told PSUs that surplus funds that are not invested would be appropriated by the exchequer. Prime Minister Manmohan Singh, too, had earlier asked PSUs to invest their surpluses or give special dividend.

Higher dividend payments from PSUs will help the government to contain the fiscal deficit by making up part of the shortfall from disinvestment and lower receipts in other heads of accounts due to slowing economic growth.

Against a disinvestment target of Rs 40,000 crore, the government has so far raised Rs 1,400 crore.

India's GDP growth slowed to 5 per cent in the year ended March from an average of 8 per cent over the past decade. First-quarter (April-June) growth slipped to 4.4 per cent from 4.8 per cent in January-March.

The World Bank today slashed India's growth forecast for the current financial year to 4.7 per cent from its earlier projection of 6.1 per cent.

Last week, the International Monetary Fund had projected an average growth rate of about 3.75 per cent in market prices for India.

The Finance Ministry has said India's economic growth would be over 5 per cent.

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